By Kishori Krishnan Exclusive to Silver Investing News

Is silver set to follow gold in these days of economic meltdown? Analysts maintain that with the fundamentals being sound, silver prices could shadow gold prices mainly due to investment demand and ratio play.

A 2009 silver forecast report from Mumbai-based Commtrendz Risk Management Services reports that unlike gold, silver also serves as an industrial metal and hence gets consumed. The recent slowdown in the global economy has seen silver prices getting battered. However, it has a strong positive correlation over lager time frame to big brother gold, which could be one of the main reasons why the shiny metal has not fallen like other industrial metals.

Commtrendz’s Silver Outlook noted that “Silver will move in line with gold with a high probability of out performance. The trend line could act as a resistance around $16.75- $17.15 in spot silver. These levels are clustered around 61.80 per cent retracement of the sharp fall we witnessed in 2008.

Initially we expect silver to find resistance towards $12.00 and then test support levels between $10.75/$11.00.This move could be followed by the next leg up towards $14.50/$15.00 range and subsequently higher towards $16.50/$17.50 levels towards the end of the year”.

The risk factor too has been outlined: “Risk lies in a failure in gold prices. Technically a break of $8.50 could see silver getting to a consolidation phase with a weaker bias.”

Silver is a smaller market, so it’s subject to greater moves, both up and down. Most traders hold that silver does well in a deflationary environment – better than gold. The reason being cited is there’s so little available and it holds every monetary aspect that gold has.

It’s rare, it’s divisible, it’s a store of wealth and it’s fungible – in other words, every ounce is like any other ounce.

If only the futures price would catch on to what has been happening over the last year or so at the world’s largest silver ETF, the iShares Silver Trust (NYSE Arca:SLV). With a massive addition of 218 tonnes on Friday, inventory reached a new all-time high of 7,063 tonnes. According to data from iShares, Friday’s big gain followed a 55 tonne increase on Thursday making this the second largest two-day addition since the fund was launched almost three years ago. The previous record was a single-day 279 tonne purchase in December of 2006.

One More Bites The Dust

Apex Silver Mines Ltd.(AMEX: SIL) filed for bankruptcy protection with a plan to sell its San Cristobal mine in southwest Bolivia to Sumitomo Corp. Apex, a Cayman Islands registered company with silver, zinc and lead mining operations in Latin America, listed assets of $721.3 million and debts of $930.9 million in its Chapter 11 petition filed in U.S. Bankruptcy Court in New York.

Apex vice president Robert P. Vogels said in court papers the company is also hoping to reach an agreement with its subordinated note holders, owed $290 million, on a debt-for-equity-and-cash swap in a reorganized Apex. The sale of the San Cristobal mine and the debt-for-equity swap would form the cornerstone of Apex’s plan to exit bankruptcy. The bankruptcy filing was prompted by Apex’s wrong-way bets on its derivative contracts, which Vogels said, the company used as hedges against fluctuations in silver, lead and zinc prices.

Sumitomo will pay $27.5 million in cash, plus other consideration, to Apex for the San Cristobal mine, Vogels said. In return Apex will operate the mine for a fee of $6 million a year. The deadline for the sale to Sumitomo closes March 31.

Company News

Azteca Gold (TSX: V.AZG) shares jumped 37 per cent after the micro cap explorer reported preliminary assays on its 50 per cent owned Two Mile Project near Osburn, Idaho. The mineral averages of these 41 samples over 85.5 feet are: 9.2 per cent zinc, 2.0 per cent lead, and 33.0 grams/tonne (g/t) silver.

Endeavour Silver Corp. (TSX:EDR) achieved its fourth consecutive year of record silver production in 2008, totaling 2.34 million ounces silver, up 9 per cent over 2007. Silver production in Q4, 2008 from the company’s two operating silver mines in Mexico, Guanacevi and Guanajuato, was a record 691,347 oz silver, up 10 per cent over the 3Q 2008 and up 8 per cent over Q4, 2007.

The new all-time high silver production can largely be attributed to the successful rehabilitation and re-commissioning of the Guanajuato Mines project, which was acquired in May 2007 but only re-commenced commercial production in June, 2008 after completion of major mine rehabilitation and safety upgrade programs

First Majestic Silver Corp. (TSX:FR) has announced that production in the Q4 ending December 31, 2008, increased to 1,070,903 equivalent ounces of silver representing a 27 per cent increase over the prior quarter production and an increase of 6 per cent over the same quarter in the prior year.

The equivalent silver production for the quarter consisted of 930,120 ounces of silver, an increase of 29 per cent over the previous quarter and 2,093,987 pounds of lead  which represents a 38 per cent increase over the previous quarter. The large increase in lead production was a result of improvements in recoveries of lead and tonnage at the flotation circuit at the La Encantada Silver Mine. Production of gold in the quarter amounted to 403 ounces representing a 25 per cent decrease compared to the prior quarter.

Yale Resources Ltd. (TSX-V: YLL) has announced that its partner Enviro Energy Capital Corp. (TSX-V: GEC) has started its first phase work program on the Mina San Jose, Zacatecas and Salvador claims that form the Zacatecas Venture. Yale owns 65 per cent of the Zacatecas Venture with Impact Silver Corp. (TSX-V: IPT) owning the remaining 35 per cent.

Enviro has an option to earn 100 per cent of Yale’s ownership by making staged cash payments totaling $150,000, issuing Yale 500,000 shares in Enviro and funding expenditures of at least $200,000 within 13 months. Yale will act as operator of the project during the earn-in process. This first phase of the earn-in is expected to last approximately three weeks.

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